Offshoring the financial services industry: implications for the evolution of Indian IT clusters

The authors explore the opportunities for existing Indian IT clusters to upgrade and undertake financial research activities. Wholesale financial activity and the accompanying financial research in banks are still highly concentrated in Western financial centers. Increasing competition in the financial services industry, as well as regulatory pressure, place the options of outsourcing and offshoring activities, especially research, to low-cost locations high on the agenda of financial institutions. For the first time, complex tasks at the core of financial activity are being offshored, which makes this an interesting case for a lot of other industries and their spatial economic organization in an ever-globalizing world. Will there be a World Financial Research Centre in Mumbai? With the aid of qualitative interview data as well as a quantitative analysis, the authors argue that research activities are locally embedded in Western financial centers to an extent that such a development is not likely. Two different research activities, country analysis and institutional equity analysis, are examined. The analysis suggests, however, that there is a certain potential for some research activities to be relocated to India. So far, investments take place in a very few existing IT clusters which have already gained a reputation in the financial community.